Mass. Tightens Spending After Revenue Misses Mark

October 15, 2012

ByBob Salsberg

BOSTON Gov. Deval Patrick’s administration on Monday ordered tighter controls on state spending and hiring but opted not to revise its revenue estimate for the current fiscal year in the face of lagging tax collections.

Jay Gonzalez, the state Secretary of Administration and Finance, said in a letter to the governor and key lawmakers that he believed the state would have enough revenue to meet its budget obligations.

Tax collections in Massachusetts, while running ahead of a year ago, fell $95 million short of benchmarks during the first three months of the fiscal year that started July 1.

Gonzalez, who is required to periodically review revenue estimates during the year to determine if changes are needed, said he was immediately imposing a cap at current levels on the number of full-time state employees in executive branch agencies. He also said agencies would face new spending limits and ordered department heads to begin drawing up contingency plans in case future budget cuts are needed.

“Although I do not believe there is currently a sufficient basis to revise the FY13 revenue estimates, I am mindful of a number of potential risks that could subsequently require a downward revision of such estimate,” Gonzalez wrote.

Among those risks: the costs of the legal crisis stemming from allegations of mishandling drug evidence at a former state Department of Public Health lab in Boston.

Gonzalez said it was his assumption that the costs to the state of responding to the crisis would be taken from the state’s so-called rainy day fund, or other “one-time resources,” so as not to directly affect the budget’s bottom line. Patrick told reporters Monday that he did not yet have an estimate of how much the state would have to spend to deal with the fallout from the investigation.

It was also possible that, by law, the state’s income tax rate could automatically fall from 5.25 percent to 5.20 percent on Jan. 1, Gonzalez said, resulting in a loss of about $57 million in revenue for the final six months of fiscal 2013.

Michael Widmer, president of the nonpartisan Massachusetts Taxpayers Foundation, said he believed the administration was taking the right approach.

“I agree that we don’t have enough information at this point to lower the (revenue) forecast, but I also agree there are lots of warning signs,” Widmer said. “The administration is wise to take these actions to squeeze spending in anticipate of having to lower the forecast” in the future.

Recent reports have suggested that Massachusetts, which outperformed the nation through most of the economic downturn, might be sliding back a bit. The state has experienced three consecutive months of slow or negative job growth, including a preliminary estimate of 4,800 jobs lost in August.